From the Long Island (N.Y.) Business News
Standard & Poor’s recently lowered New Jersey’s credit rating, citing concerns over unfunded pension and health benefits for public workers that could balloon to $185 billion by 2040.
The downgrade, to AA-, comes despite concerted efforts by Gov. Chris Christie to rein in spending on state employee benefits, including a proposal that seeks an increase in the retirement age and asks for a modest 8.5 percent pension contribution from workers and a 70-30 split on health costs. Christie’s proposals have languished in the state Legislature for five months.
The S&P downgrade will increase the interest rates New Jersey must pay when it borrows money, further hampering the state’s efforts to dig itself out of a mountain of debt. The state’s retirement system is $55 billion behind right now, and the fund for retiree health care is even further in arrears.
It’s easy to point the finger in instances such as this, and New Jersey’s Democratic-controlled Legislature wasted no time in blaming Christie, a Republican. In truth, both sides have spent decades creating the problem, spending freely in good times without regard for the future. The big difference is that voters have made it clear they want solutions, not backbiting.
Christie has blamed overgenerous employee contracts, and he’s right. But the state has exacerbated the problem by failing to make adequate annual payments, rolling forward the amount required by actuarial rules. Last year, Christie’s first in office, the state should have contributed $3 billion. Facing a large budget deficit, it paid nothing.
New Jersey’s woes resonate with New York state workers and lawmakers, as Albany tackles the mammoth budget cuts and spending reforms proposed by Gov. Andrew Cuomo. It’s easy to look back and blame, much tougher to work together going forward.
Standard & Poor’s no doubt will be watching.
— The Long Island Business News is owned by The Dolan Company.